The state budget took two crucial steps toward its finale Wednesday. The Senate Appropriations and Revenue committee presented its version of the two-year biennial budget, and it moved through the Senate floor on the same day. The bill will now head back to the House for approval, but it’s likely to face additional changes via a conference committee.
Either way, the final draft of the budget will most likely look like a combination of the House and Senate budgets. With Republicans having supermajorities in both the House and Senate, they have complete control of the state’s purse strings this session.
This budget process has also been a bit unusual with the House releasing its budget ahead of the governor’s. Beshear called the move unprecedented, but it also seemed to give cause some hiccups in the process.
“It causes a little bit of the change in the normal flow of our work process, but it’s nothing that can’t be overcome and it was a little bit of a variation,” said Senate A&R Chair and Northern Kentucky Senator Chris McDaniel (R-Taylor Mill).
For Northern Kentuckians, yes, there is funding for the Brent Spence Bridge Project in the $105 billion budget. Still, McDaniel showed some uncertainty at the Brent Spence Bridge Memorandum of Understanding announcement on Feb. 28.
“That’s the question of the century,” McDaniel said when asked if the Senate budget would have funding for the project at the meeting. “Everybody still has hope. We’ll see how it goes.”
But either way the budget shakes out, there is almost certainly going to be funding, as Northern Kentucky legislatures from both parties want to see the project cross the finish line. The next two years are election years, and the project remains a key issue in the Tri-State.
In January, Gov. Andy Beshear offered $250 million from the General Fund in his budget presentation, and the Senate budget will fall short of that number by $50 million. It does seem like the governor’s office and the Senate worked together over finding money for the project, however, which shows promise for the project.
“There is $200 million per the governor’s request that gets transferred to the road fund to provide matching funds for the federal grants for mega projects,” McDaniel said in his presentation. He clarified after the meeting that these funds are for the Brent Spence project.
The companion bridge project that won’t include tolls will likely cost around $2.8 billion, with $2 billion expected to come from the federal Infrastructure bill past last year. Under President Joe Biden’s bill, $39 billion has been set aside for bridges and would come in the form of matching grants.
This would leave $800 million to be split between Ohio and Kentucky, or they would need to find matching funds from somewhere else. At the bridge meeting, Beshear noted the $250 million he offered up from the General Fund, but Ohio Gov. Mike DeWine was unclear on how much Ohio would put on the table. Now that the funds are likely to be around $200 million from the Commonwealth, it would leave roughly $600 million to still be covered by the states.
The budget proposal also includes funds for state employee raises, school needs, a training range for police, more lung cancer screening, significant renovations to the state Capitol, improvements to state parks, and others.
One of the main areas of all three budgets, including the House Budget, is Support Education Excellence in Kentucky funding. Beshear set aside roughly $2 billion for education, including a 16.9 percent increase that put SEEK funding at $685 million more than the House Budget.
The House Republican plan sought to increase the “base SEEK guarantee” of $4,100 in the first fiscal year and $4,200 in the second. For every dollar that SEEK increased under the Republican plan, it would lead to an additional $800,000 investment in public school districts. The base figures in Beshear’s plan would be $4,300 per student in 2023 and $4,500 per student in 2024.
The funding for SEEK in the Senate budget would look pretty similar to that of the House’s budget. McDaniel pointed out that the Kentucky Department of Education received about $1.9 billion from the American Rescue Plant Act and the Coronavirus Aid, Relief, and Economic Security Act.
“But we felt it was still important to push additional funds through the SEEK formula,” McDaniel said. “So in year one, we increased it to $4,100, and in year two, we increased it to $4,200.”
In an analysis of the Senate budget, the Kentucky Center for Economic Policy said the Senate budget takes a step in the wrong direction for educational funding.
“The Senate budget released this morning doesn’t just repeat many of the same mistakes and miss out on many of the same opportunities as the House did in their January proposal,” said Jason Bailey, KyPolicy’s executive director and author of the new analysis. “In some ways, the Senate proposes to take an even bigger step in the wrong direction. Despite a once-in-a-generation budget surplus, the Senate has proposed to invest $311 million less than the House budget on P-12 education, including not funding full-day kindergarten and less for student transportation and other needs. By putting less money in education, the Senate would make providing pay raises for teachers and school employees even more difficult than what the House proposed.”
The budget also wouldn’t fund universal Pre-K, which is something the governor and Northern Kentucky Democrats lauded after the governor’s budget speech.
“I really love the universal pre-school for all 4-year-olds proposal, which is $172 million each year of the budget,” said Rep. Buddy Wheatley (D-Covington) in January. “That kind of commitment to pre-school education enables many districts to also fund three-year-old pre-K.”
When McDaniel joined the Senate in 2013, he noted the state was in a financial crisis. Now, the state will be able to sit on more than $1.7 billion in the budget reserve trust fund and more than $1.2 billion in unspent money. This takes into account potential tax rebates for Kentuckians.
“Pensions had not been fully funded in over a decade, and the state was borrowing money like a drunken sailor at a Friday night poker game,” McDaniel said.
Both chambers’ budgets will have to account for the tax rebates and the Republican tax plan that will slowly lower the state’s income tax to zero. McDaniel sponsored Senate Bill 194, which will see Kentuckians potentially receive up to $500 in tax rebates. House Bill 8 will see the state lower its income tax incrementally, with the first one percent drop happening on Jan. 1, 2023.
“This extra money is in part because of the General Assembly’s frugal budgeting the last couple of years,” said Sen. Michael Nemes (R–Shepherdsville) regarding SB194. “Some want us to spend money on ways we think the state needs … but I’m glad we’re giving it back to the people that paid for it.”
While proponents of the income tax reduction say that the bill put more money in the pockets of Kentuckians, it will also raise the sales tax on a lot of digital services, such as Uber and digital subscriptions.
“Early calculations show that a 1% decrease in income tax rates would only net out to about $5/week for the average Kentuckian earning around $50,000 a year (Kentucky Center for Economic Policy),” said Rep. Rachel Roberts (D-Newport). “Most people I speak with would rather see that $5 continue to go to funding our schools, public transportation, lowering college tuition rates, reopening child care centers, and propping up rural hospitals than use it to give the wealthy yet another tax break.”
Senate Minority Floor Leader Morgan McGarvey (D-Louisville) noted in both the A&R meeting and on the flo0r that the minority caucus didn’t have much time to review the document, and “this is not how we make policy here in Frankfort,” he said. On the Senate floor, he elaborated:
“This is not the final budget we are working on – it’s the first step,” he said. “But as we talk about process, I do want to talk about some of what happened with this budget. The reality is that we were not given a printed copy of the budget until this morning during committee at 9 a.m. Here we are on the floor this afternoon voting the document out the same day.”
Additional Senate budget highlights include:
A $4,800 raise for social workers in the first year and an additional 10% raise in year two
· A roughly 30% raise for state medical examiners along with 22 new positions in the office
· Base funding for public universities and $97 million each year for the performance-based funding model for higher education
· A $4 per day per diem increase for local jails
· Full funding for a firing range at the Department of Criminal Justice Training. The budget would also set the stage for a new training academy in Madisonville with appropriations in the second year.
· An increase in law enforcement training stipends to $4,300 per year
· An allocation of $500,000 to audit the state’s workforce initiatives
· $5 million for child advocacy centers, $3.5 million for domestic violence centers, $1.5 million for rape crisis centers, and $1 million for substance abuse program review
· $215 million in one-time funding to shore up the Kentucky State Police Retirement System
· $250 million in year two for upgrades to the state parks system
· $250 million in year two to renovate the state Capitol, which faces challenges with leaking, peeling paint, an old HVAC system, and other problems
· $200 million for the renovation of the state fairgrounds
· $25 million for county clerks for an online deed system and voting machines
· A $75 million grant pool for nonprofits
· A $200 million transportation project fund as requested by the governor
· 200 new guard positions for the commonwealth’s prisons